Thursday, July 21, 2011

YRC Worldwide Inc. (NASDAQ: YRCW): Q2 Earnings Preview 2011

YRC Worldwide Inc. (NASDAQ: YRCW) is scheduled to release its second-quarter earnings before the opening bell on Friday, July 22, 2011. Analysts, on average, expect the company to post a loss of 92 cents per share on revenue of $1.22 billion. In the year ago period, the company posted a loss of $2 per share on revenue of $1.12 billion.

YRC Worldwide Inc., through its subsidiaries, provides various transportation services worldwide. YRC Worldwide, through wholly owned operating subsidiaries offers its customers a range of transportation services.

In the first-quarter, the Overland Park, Kansas-based company's net loss was $274.13 million, or 53 cents per share, compared to a loss of $273.78 million, or $4.61 per share, in the year-ago period. On an adjusted basis, the company posted a loss of 33 cents per share in the latest quarter. The current year's loss per share was lower due to significant increase in share count during the latest quarter. Operating revenues shrank 29.2% to $1.06 billion from $1.50 billion in the year-ago quarter. Analysts, on average, expected the company to post a loss of 48 cents per share on revenue of $1.11 billion. billion.

Recently, the company announced a rosy financial outlook for fiscal 2011. The company estimated that its fiscal 2011 revenue will rise by a whopping 14% to $4.93 billion compared with $4.33 billion in fiscal 2010. Adjusted earnings before interest, taxes, depreciation, and other charges will be around $209.8 million, a considerable increase of 184% from $73.9 million in fiscal 2010.

Although the U.S. trucking industry is recovering from recession, YRC Worldwide fails to cope with this current recovery. YRC Worldwide has been struggling under the threat of bankruptcy resulting from a significant fall in freight volume coupled with its highly leveraged balance sheet. Although the U.S. trucking industry is recovering from recession, YRC Worldwide fails to cope with this current recovery. The company’s viability depends on its ability to become profitable but unfortunately, we do not expect it to reach that stage any time soon.

The company is facing major challenges including sustaining liquidity, dilution of preferred stock, loss of customers and a competitive LTL (less than truckload) market. Trucking industry remains highly competitive.

The company has been through a massive restructuring and downsizing over the past two years while enduring huge losses. In addition to closing hundreds of terminals, laying off about one-half its work force and sharply cutting compensation, YRC avoided bankruptcy in late 2009 when most of its bondholders agreed to convert debt to equity and gain ownership of most of the company.

Last month, the company said that it has made significant progress in negotiating the terms of the major agreements that are required to achieve the company's financial restructuring by the end of July. The company had previously announced that it had reached an agreement in principle on February 28 that set forth the overall plan for the YRC Worldwide financial restructuring, which will include a very substantial dilution to common shareholders.

Early this month, the company announced that it has obtained commitments for a three-year, $400 million asset-based loan facility that would replace the company's existing asset-backed securitization or ABS facility. YRC said the commitments were a significant milestone as it moved toward closing its financial restructuring plan.

Full Disclosure: None.
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